According to several U.S. media reports, congressional leaders of both parties in the Democratic and Republican parties said recently that they believed that they were hopeful of reaching a compromise on a new round of relief plan.
After months of deadlock, the bailout bill has seen the dawn again, behind which is the huge pressure of the previous series of “old clauses” approaching.
With high expectations, if Congress fails to introduce a new version of the relief bill this time, resulting in a “rescue cliff”, it may have consequences such as a large number of unemployed people not receiving any relief, tenants being evicted from their homes, and the pressure on student loan repayment is sharply increased, which will not only seriously damage the livelihoods of millions of Americans, but also It may plunge the U.S. economy into a new recession.
Multiple pressures to promote relief negotiations
According to the New York Times, the overwhelming majority of independent economists are in favor of adopting a new rescue plan by the end of the year, coupled with pressure from constituencies and the struggle for dominance over the new Senate, which has accelerated the pace of action by members of both parties in the Democratic and Republican Party.
Congressional leaders of Democratic and Republicans said on December 2nd local time that they thought there was hope to reach a compromise on a new rescue plan. House Speaker Nancy Pelosi and Senate Democratic Leader Chuck Schumer said in a joint statement on the same day that the recently proposed $908 billion bipartisan framework should be the basis for negotiations on a new version of the bailout bill.
Pelosi and Schumer said that the framework “should serve as the basis for immediate bipartisan negotiations” and that “of course, we and others will provide suggestions for improvement, but immediate action is needed. We believe that through sincere negotiations, we can reach an agreement.”
Congressional Democratic leaders’ openness to the recently rumored $908 billion relief plan under the bipartisan framework marks the renewed momentum of the bailout negotiations after months of deadlock.
The analysis suggests that while Democrats are inclined to introduce a larger bailout, such as the $3 trillion bill passed by the House in May, the reality is that Republicans who control the Senate will not accept such a huge spending plan, and Pelosi and Schumer’s statement is based on a $908 billion bipartisan framework. Basics, a certain willingness to compromise has been released.
In response, Senate Republican Leader Mitch McConnell previously said that Democratic leaders had “expressed a new willingness to engage in good faith.”
The next step depends on McConnell and other Senate Republicans, some of whom are not interested in the bipartisan $908 billion rescue plan that tries to break the legislative deadlock. What they want is to pass a targeted rescue bill of about $500 billion this year.
But the problem is that both parties, Democratic and Republican parties, are currently “politically motivated,” hoping to show a response to the economic pain faced by some Americans. The second election for the Senate seat in Georgia on January 5 next year will determine which party controls the Senate. Dominating the Senate means the right to approve or obstruct the appointments of the new Biden administration.
Both parties want to create a people-friendly image during the sprint stage. If Democrats win two seats, they will “fing” with Republicans in the Senate, and can hold the comparative advantage with a key vote of Vice President-elect Kamala Harris from next year. However, it is not easy for Democrats to win all two seats.
The deadline of “rescuing cliffs” is approaching.
Of course, the real pressure to push the bailout negotiations has always come from the economic and people’s livelihood aspects. At present, the mainstream view of the American economic community is that the economic recovery has slowed down in recent weeks as the spread of the novel coronavirus has intensified, and the economy and people’s livelihoods may deteriorate further if Congress fails to pass a new rescue plan and cause a “suff”. And the “bluff” deadline is on December 31, when many spring relief provisions will expire.
The New York Times sorted it out as follows:
First, about 7 million freelancers, contract workers, and other Americans who are not eligible for traditional unemployment benefits are about to lose the COVID-19 Unemployment Assistance Program (PUA). They now receive an average of $1058 a month in aid, and if they lose this fund, their livelihood will soon be lost.
In the United States, contract workers, casual workers and freelancers are usually not eligible for traditional unemployment benefits, but this situation changed after Congress passed the stimulus bill in the spring, which provides federal funds to states so that this “brink” can also claim unemployment benefits.
This spring legislation is significant because gig workers have played a more important role in the U.S. economy than ever during the COVID-19 pandemic. Once the “bluff” at the end of December, the impact is difficult to estimate.
Second, nearly 5 million Americans who have been unemployed for at least six months will also be cut off from aid. These people now receive an average of $1,253 a month in aid, which effectively supports the economic source after the “unemployment extension”.
The reason for getting aid after the “unemployment extension” is that the previous stimulus bill included a pandemic emergency unemployment benefit program (PEUC) — providing an additional 13 weeks of subsidies to those who are unemployed after the government’s regular unemployment benefits expire.
At present, more than half a year after the outbreak of the epidemic, more and more Americans have lost their jobs for at least six months, exceeding the 26-week regular unemployment benefit period and being forced to turn to the epidemic emergency unemployment benefit program, so the relief period has been extended to 39 weeks.
Once the “bluff” at the end of December, millions of Americans will no longer receive any unemployment benefits.
Third, the federal moratorium on evictions designed to protect tenants from landlords will also expire at the end of December. At that time, millions of Americans may face the fate of being expelled from home, which is not only a humanitarian disaster, but also may exacerbate the coronavirus epidemic and make the fight against the United States more difficult.
Fourth, the relief clause that provides student loan repayment grace will also expire on December 31, when about 21 million people will have to start repaying student loans again.
Most of the $1.7 trillion federal student loans in the United States can enjoy previous bailout such as suspending principal repayments and canceling accumulated interest, but after the repayments begin to resume next year, many already overstretched Americans will have another bill.
Fifth, the preferential tax policy that gives more than 125,000 enterprises no layoff incentives will expire at the end of December, and enterprises will lose the ability to defer payment of payroll tax and deduct business losses.
Finally, the $150 billion aid package for state and local governments will expire at the end of December. Without more assistance at that time, governments at all levels may need to cut schools, police, health care and other projects, and public service capacity will be further impacted.
On the other hand, at the macroeconomic level, Moody’s Analytics predicts that with the “bailout cliff”, the U.S. economy will fall into a new recession early next year, and the unemployment rate may approach 10%. Federal Reserve Chairman Jerome Powell said recently that the history of economic crisis shows that Congress usually passes too few stimulus measures, not too many people worry too much.
“It will indeed help to put in some fiscal support now…let’s get through this winter” and support businesses and families until the vaccine allows more Extensive business activities resumed.
The latest beige book released by the Federal Reserve shows that the second wave of epidemics that policymakers have previously feared will trigger a gradual trend of economic slowdown in winter.
At its policy meeting, December 15-16, the Federal Reserve will debate whether to provide more support to the economy.